Patrick Gerard Gladwyn Jebb as trustee of the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd
[2018] WASC 166
•1 JUNE 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: PATRICK GERARD GLADWYN JEBB as trustee of the TRAFALGAR WEST INVESTMENTS TRUST -v- SUPERIOR LAWNS AUSTRALIA PTY LTD [2018] WASC 166
CORAM: KENNETH MARTIN J
HEARD: 26 & 30 APRIL 2018
DELIVERED: 1 JUNE 2018
FILE NO/S: CIV 1704 of 2018
BETWEEN: PATRICK GERARD GLADWYN JEBB as trustee of the TRAFALGAR WEST INVESTMENTS TRUST
Plaintiff
AND
SUPERIOR LAWNS AUSTRALIA PTY LTD
First Defendant
KINGSLEY CRAIG FLUGGE
Second Defendant
MARGARET FLUGGE
Third Defendant
JEROME MATTHEW FLUGGE
Fourth Defendant
LINLEY FLUGGE
Fifth Defendant
DAMIEN CRAIG FLUGGE
Sixth Defendant
TRAFALGAR WEST INVESTMENTS PTY LTD (IN LIQ)
Seventh Defendant
Catchwords:
Corporations - Statutory oppression - Attempted substitution of plaintiff in subsisting litigation - Statutory cause of action - Personal action of member - Argued vesting of cause of action in subsequent trustee of shares - Different members of corporations - Different rights - Discretion to substitute plaintiff in subsisting litigation
Legislation:
Corporations Act 2001 (Cth)
Trade Practices Act 1984 (Cth)
Trustees Act 1962 (WA)
Result:
Substitution application refused
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr S Standing (pro bono) |
| First Defendant | : | Mr M L Bennett |
| Second Defendant | : | Mr M L Bennett |
| Third Defendant | : | Mr M L Bennett |
| Fourth Defendant | : | Mr M L Bennett |
| Fifth Defendant | : | Mr M L Bennett |
| Sixth Defendant | : | Mr M L Bennett |
| Seventh Defendant | : | Mr D Thompson (on 26 April 2018 only) |
Solicitors:
| Plaintiff | : | Jebb Legal |
| First Defendant | : | Bennett + Co |
| Second Defendant | : | Bennett + Co |
| Third Defendant | : | Bennett + Co |
| Fourth Defendant | : | Bennett + Co |
| Fifth Defendant | : | Bennett + Co |
| Sixth Defendant | : | Bennett + Co |
| Seventh Defendant | : | No appearance |
Case(s) referred to in decision(s):
AON Risk Services Australia Ltd v Australian National University [2008] ACTCA 13; (2008) 227 FLR 388
APT Finance Pty Ltd v Bajada [2008] WASCA 73
Belgravia Nominees Pty Ltd v Lowe [2017] WASCA 127; (2017) 51 WAR 341
Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jacques [No 2] [2016] QSC 242
Ma v Ma (2012) ONCA 408
MG Corrosion Consultants Pty Ltd v Gilmour [2011] FCA 1514
Mijac Investments Pty Ltd v Graham [No 2] [2009] FCA 773
Park v Allied Mortgage Corporation Ltd (1993) ATPR (Digest) 46 - 105
Patrick Gerard Gladwyn Jebb as Trustee of the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2017] WASC 335
Re Spargos Mining NL (1990) 3 WAR 166
Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia [No 6] [2014] WASC 203
The Owners - Strata Plan No 5290 v CGS & Co Pty Ltd (2011) 81 NSWLR 285
Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2012] WASC 460
Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 12] [2016] WASC 216
Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 2] [2013] WASC 143
Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 6] [2014] WASC 278
Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Pty Ltd [No 7] [2015] WASC 280
Trafalgar West Investments Pty Ltd v LCM Litigation Management Pty Ltd [2016] WASC 159
Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] [2012] WASC 169
Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 3] [2012] WASC 319
KENNETH MARTIN J:
I am dealing with the plaintiff's (Mr Jebb's) originating motion filed on 23 April 2018, which seeks relief substantively in terms that he (as the applicant) '… in his capacity as trustee of the Trafalgar West Investments Trust be substituted as plaintiff in COR 59 of 2011 in lieu of Trafalgar West Investments Pty Ltd (in Liq)'.
The application is essentially a sequel to vesting orders which are the subject of my reasons in CIV 1179 of 2017: see Patrick Gerard Gladwyn Jebb as Trustee of the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2017] WASC 335 (delivered 20 November 2017). The reasons which follow must be read with and assimilated with those earlier reasons, which I refer to as 'my vesting order reasons'.
There is a degree of urgency in the present application since COR 59 of 2011 currently sits on the Inactive Cases List pursuant to my Orders of 18 January 2018. Consequently, COR 59 of 2011 is presently subject to a potentially terminal vulnerability via O 4A r 28(1) of the Rules of the Supreme Court 1971 (WA) (RSC), which provides that cases on the Inactive Cases List for six continuous months are taken to be dismissed for want of prosecution.
The present application for the substitution of Mr Jebb as plaintiff in lieu of Trafalgar West Investments Pty Ltd (Trafalgar) was initially attempted to be advanced by Mr Jebb through his sole practitioner law office, Jebb Legal (ie, Mr Jebb himself), on an erroneous basis of his attempted filing of a chamber summons in COR 59 of 2011 seeking that relief. However, given the proceeding is on the Inactive Cases List and RSC O 4A r 28(1), that first course was always misconceived even for a party to COR 59 of 2011, let alone for a non-party to COR 59 of 2011, like Mr Jebb.
After a brief but contested hearing of COR 59 of 2011 on 20 April 2018, Mr Jebb, with the assistance of pro bono counsel, brought the present substitution of plaintiff application (ie, into COR 59 of 2011) via an originating motion. All parties have actively co‑operated towards an urgent hearing of this originating motion. Trafalgar, through its liquidators, consented to leave being granted pursuant to s 500(2) of the Corporations Act 2001 (Cth) for Mr Jebb's originating motion to proceed against Trafalgar as the seventh defendant. I granted leave to that end. Moreover, Trafalgar, at the behest of its liquidators and through its independent counsel, has indicated the liquidator's support for this substitution of plaintiff application as it is now advanced by Mr Jebb, towards COR 59 of 2011.
A written communication from Trafalgar's liquidators to my Associate of 28 March 2018 accepts that Trafalgar has, effectively, been non‑suited in COR 59 of 2011 as a consequence of the cessation of Trafalgar's membership of the first defendant, Superior Lawns Australia Pty Ltd (Superior Lawns), after my vesting orders: see attachment PGJ 3 of Mr Jebb's affidavit of 23 April 2018.
Upon the issuing of vesting orders on 14 February 2018, following the vesting order reasons, the relevant shares as formerly held in Superior Lawns by Trafalgar were vested in Mr Jebb at the date of those orders. Subsequently, the share register of Superior Lawns was updated. It now shows that on 23 February 2018 Trafalgar ceased to be recorded as the owner of those shares, but correlatively, Mr Patrick Jebb was recorded as the owner of those same shares (non-beneficially). So, for the purposes of pt 2F.1 of the Corporations Act, it was on 23 February 2018 that Trafalgar ceased to be a member (ie, shareholder) of Superior Lawns. On the same day Mr Jebb acquired his membership status of Superior Lawns in respect of the same shares formerly registered to Trafalgar.
In other words, Trafalgar, which I will at times refer to as member A of Superior Lawns, was on 23 February 2018 replaced by Mr Jebb, who I will at times refer to as member B, on the share register of Superior Lawns - concerning the same parcel of shares which had vested in Mr Jebb by my vesting orders of 14 February 2018.
The substitution of plaintiff application is now advanced by Mr Jebb via RSC O 18 r 6 or, alternatively, r 7. That is discernible from Mr Jebb's written outline of submissions of 23 April 2018.
Mr Jebb's written submissions make no distinction as between reliance on RSC O 18 r 6 or r 7. However, applying the observations by Pullin JA and Newnes AJA in APT Finance Pty Ltd v Bajada [2008] WASCA 73, it is apparent to me that whilst a substitution of plaintiff application may legitimately be brought pursuant to r 6, the preferred basis would be under r 7: see Bajada[35] - [38]. I will proceed on that basis. For present purposes, little seems to turn upon the distinction. In either case, it is accepted that the making of a substitution of plaintiff order will also carry with it discretionary considerations for evaluation by the Court: see Bajada[32] as regards RSC O 18 r 6(2).
For the prevailing circumstances, discretionary considerations are significant. That is so even if a legitimate juridical basis for a potential substitution of Mr Jebb as plaintiff into COR 59 of 2011 is shown to subsist.
There are some important preliminary matters to identify before the merits of establishing a legitimate juridical basis of the present substitution application, which is opposed by the first to sixth defendants, can be confronted. The first is to precisely identify what Mr Jebb is not attempting under his current originating motion.
Mr Jebb's present arguments
At [209] of my vesting order reasons, I had said this:
… the vesting orders, once effective, would permit Mr Jebb to invoke s 234(d) - but, in my view, only for Mr Jebb to commence (hypothetically) a fresh action, if he has a basis, to complain of his own statutory oppression by Superior Lawns and to seek relief pursuant to Pt 2F.1.
The vesting orders over shares as sought by Mr Jebb in 2017 were capable of being supported as a matter of principle, with an eye for Mr Jebb (hypothetically) commencing his own fresh statutory oppression action against Superior Lawns (subject to any limitation of action issues and other obstacles, if raised): see Belgravia Nominees Pty Ltd v Lowe [2017] WASCA 127; (2017) 51 WAR 341. On the authority of Re Spargos Mining NL (1990) 3 WAR 166, which I have extensively discussed in earlier reasons of mine in COR 59 of 2011 (see Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] [2012] WASC 169, Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 2] [2013] WASC 143 and Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 6] [2014] WASC 278, it would be theoretically possible for Mr Jebb to complain by a fresh action (ie, as member B) about alleged oppressive conduct of Superior Lawns against Trafalgar (as member A), provided that he was a member of Superior Lawns at the date he commenced his fresh action (assuming there was no other subsisting action raising the same grievances - thereby constituting an abuse of process). However, the range of discretionary relief theoretically open to Mr Jebb via s 233 of the Corporations Act, if he ultimately succeeded at a trial on such an action (ie, as member B), might well not be the same discretionary relief as would have been afforded to Trafalgar (ie, as member A) as the victim of the alleged oppressive conduct - had Trafalgar brought the statutory oppression application.
In my vesting order reasons at [209] I had said:
Obviously the vesting orders would not be issued with a view to supporting Mr Jebb's substitution for T Co as plaintiff in the existing COR 59 of 2011 litigation, since on my assessment that substitution application is likely to fail.
It may be remembered that at the behest of all parties in COR 59 of 2011, I had been asked on the vesting order application of Mr Jebb to evaluate the prospective merits or demerits of a future substitution of plaintiff application being brought by Mr Jebb, following a hypothetically successful vesting order application. I did, on the basis of an attempt to evaluate all potential arguments both for and against the course of future conduct as then foreshadowed by Mr Jebb through his counsel.
In my vesting order reasons, I observed that a hypothetical substitution of plaintiff application post the issue of vesting orders obtained by Mr Jebb would be likely to fail: see [224] - [227] of my vesting order reasons. I had said:
Within par 3.12 of Mr Jebb's reply submissions a further submission is advanced towards the suggested force of Bajada, in these terms:
No new claim is involved here; the plaintiff (who is entitled to stand in the shoes of the former trustee) merely acquires by way of transmission the same interest (ie ownership of the shares) as founded the former trustee's oppression claim.
By my assessment, that submission is also wrong. It displays a conceptual fallacy that ignores the required membership criteria (ie, shareholder standing) towards COR 59 of 2011. That an underlying trust remains the same beneficiary throughout, despite different trustees, is simply neither here nor there as an issue of legal relevance in this context, on my assessment.
Mr Jebb's substitution submission erroneously seeks to elevate the phenomenon of a continuing equitable ownership via a trust, as an issue of relevance to the administration of a corporation's share register. The Pt 2F.1 provisions of the Corporations Act are not concerned with equitable ownership of shares or with trusts over shares. Rather, they are concerned with the office of a member of the corporation, for the purpose of rendering an assessment about the corporation's potentially oppressive conduct vis-à-vis such a member, or in the limited further scenarios allowed beyond membership, as expressly allowed under s 234.
Whether a member acts in a capacity of trustee or otherwise over their shares is irrelevant in this context. Whether that member might at the end of the day hold rights for which they are accountable as a fiduciary to underlying beneficiaries of a trust, is a distinct side consideration. It is a consideration that is wholly irrelevant to the foreshadowed plaintiff substitution application of Mr Jebb in COR 59 of 2011.
Notwithstanding those negative evaluations as expressed within my vesting order reasons, it is clear Mr Jebb's current application does not seek to bring a fresh oppression action as a member of Superior Lawns. Rather, essentially, it is for him to be substituted as the continuing plaintiff in lieu of Trafalgar in COR 59 of 2011. It is also apparent that in the wake of my vesting order reasons Mr Jebb and his advisers have fashioned some new legal arguments in support of his proposed substitution as plaintiff for Trafalgar.
As I understood the new arguments put in support of the present substitution application by pro bono counsel for Mr Jebb on 26 and 30 April 2018, no challenge is now raised against any of the prima facie determinations that I expressed by way of obiter in the vesting order reasons (see ts 67), and which were then ultimately expressed adversely against the merits of such a future substitution application by Mr Jebb possibly succeeding.
The current substitution application was argued only by reference to what are described as Mr Jebb's new arguments. The new arguments present as being grounded heavily upon the suggested force of s 10(1) of the Trustees Act 1962 (WA) which is said to favour Mr Jebb being substituted as plaintiff, especially when read in combination with s 234 of the Corporations Act.
The new arguments direct focus at the statutory oppression 'cause of action' that is COR 59 of 2011, rather than at the now vested shares in Superior Lawns. It is essentially contended that upon Mr Jebb appointing himself as the replacement trustee in lieu of Trafalgar on 13 December 2016, from that time, irrespective of any subsequent vesting order concerning the shares in Superior Lawns, the statutory chose in action for oppression by Trafalgar, which is the subject matter of COR 59 of 2011, was then transmitted to Mr Jebb. That is so because he became the new trustee of that trust via the terms of s 10(1) of the Trustees Act.
A new argument focusing upon the statutory cause of action, as opposed to the earlier vesting orders which focussed upon the shares in Superior Lawns, explicitly does not contend any assignment to Mr Jebb of Trafalgar's COR 59 of 2011 statutory cause of action under the Corporations Act (as an exercise of this court's federal jurisdiction) against Superior Lawns and other defendants. Indeed, as a matter of accepted fact, no assignment has ever been called for or made to Mr Jebb of this statutory cause of action vis-à-vis Trafalgar by its liquidators.
The new argument is that by the force and effect of s 10(1) of the Trustees Act, on 13 December 2016 all rights in the statutory oppression cause of action that is COR 59 of 2011 were vested in Mr Jebb - as newly appointed trustee of the Trafalgar West Investments Trust. However, no case authority was cited to me to support that proposition. Independent enquiries made since have found none.
Nevertheless, this legal proposition was newly sought to be advanced as a matter of so-called principle by Mr Jebb. However, there is a well‑settled body of substantive case law firmly rejecting the possible assignability of a statutory cause of action pursuing compensation under former s 82 of the Trade Practices Act 1984 (Cth) (now the Australian Competition and Consumer Law). The first step in the chain of underlying propositions advanced by Mr Jebb is that the opposite position is the case as regards a permissible assignability of a statutory oppression cause of action that is advanced under s 232 of the Corporations Act.
It was submitted for Mr Jebb that a statutory oppression action is materially different in character to a statutory cause of action under the Trade Practices Act. It was contended that the material difference, arising as a matter of the proper construction of Pt 2F.1 of the Corporations Act, is that a statutory oppression action that is advanced under federal law can be regarded as being in the nature of 'property' that is inherently not personal. Hence, it is capable of being assigned (or more relevantly here, of being 'transmitted' under s 10(1) of the Trustees Act) to a new trustee. That is argued to be the case notwithstanding the wholly statutory basis of the oppression action.
The next stage of the argument as I understand it is that the potential assignability of the statutory cause of action supports a conclusion that the statutory oppression cause of action commenced by Trafalgar in COR 59 of 2011 is in the nature of property, which was property transmitted by law to Mr Jebb as a new trustee. It was contended that happened via the force and effect of s 10(1) of the Trustees Act. To that end, it was also contended by pro bono counsel for Mr Jebb that obiter observations of Gordon J in the Federal Court in Mijac Investments Pty Ltd v Graham [No 2] [2009] FCA 773, to which I referred with approval in Trafalgar as Trustee for the Trafalgar West Investments Trust v Superior Lawns [No 2] [2013] WASC 143 [15], were 'wrong'. In Mijac, her Honour had observed that breaches of s 232 of the Corporations Act were rights to sue for breaches of duty and in the nature of personal rights, which could not be assigned as choses in action.
Finally, it was accepted by Mr Jebb that the evaluation of an application to substitute a plaintiff in a subsisting action via RSC O 18 r 6 or r 7 necessarily involves an exercise of the court's discretion, but that all present circumstances favoured a substitution of Mr Jebb as plaintiff. In effect, it was said that any prior unsatisfactory conduct of Trafalgar as plaintiff in COR 59 of 2011 cannot or should not be held against Mr Jebb, albeit he was and remains the sole director of Trafalgar from 2011 and is responsible for all its strategic decisions taken in COR 59 of 2011. It was also said Mr Jebb had now secured a replacement overseas litigation funder for COR 59 of 2011, albeit conditional upon his substitution as plaintiff in that matter. Mr Jebb also promised by another affidavit to advance that action to trial on a proper basis if he were to be substituted as plaintiff as he now seeks.
Having summarised the nature of new arguments as now advanced by Mr Jebb upon his present application, it can be observed at the outset that:
(a)no Australian case authority supports a conclusion that a cause of action under the Corporations Act grounded upon alleged statutory oppression is capable of being the subject of assignment or transmission to another person via the force and effect of a State law;
(b)there are no identifiable prior instances where orders akin to those currently sought by way of a substituted plaintiff have ever issued; and
(c)underlying Mr Jebb's arguments is a sentiment that a statutory oppression cause of action that is advanced under Pt 2F.1 of the Corporations Act is essentially 'property' that is beneficially owned by a trust beneficiary - so that all Mr Jebb is seeking as a new trustee is to regularise an inconvenient position upon the insolvency and failure of the former trustee that is now in liquidation (Trafalgar).
Hence, the present arguments put for Mr Jebb are propositions said to be grounded in asserted principle, but are without precedential support.
There is a further preliminary matter I need to deal with.
Potential disqualification
Mr Jebb attempted to file a chamber summons in COR 59 of 2011 seeking his substitution as plaintiff. Upon the Principal Registrar referring this chamber summons to me, I offered pro bono counsel for Mr Jebb an opportunity to put submissions about having the chamber summons determined by another judicial officer (in a context of then canvassing Mr Jebb's application being properly pursued by way of an originating motion). I made the offer given my prima facie observations about Mr Jebb's foreshadowed substitution in my vesting order reasons, which were in terms largely negative to Mr Jebb's prospects upon a foreshadowed substitution of plaintiff application in COR 59 of 2011.
Notwithstanding that offer, there was no indication forthcoming on behalf of Mr Jebb that I should not determine the then foreshadowed originating motion once it was filed. Pro bono counsel for Mr Jebb indicated he was content for me to determine his substitution application (see ts 351). Consequently, I have proceeded on the basis that there is no objection to my determining the present application on an urgent basis, notwithstanding any observations in my vesting order reasons. In any event, Mr Jebb's legal arguments, as mentioned, have since changed.
It is necessary that I briefly address the state of the materials relied upon by all parties in the present application.
The evidence relied upon
In the circumstances of an urgent final hearing of Mr Jebb's originating motion and in the absence of opposition from the defendants, I ordered that there be leave in these proceedings to read again all of the affidavit evidence as filed and read in CIV 1179 of 2017 (ie, upon the vesting order application), save for one presently immaterial matter. My reasons in CIV 1179 of 2017 identify a large number of affidavits then relied upon: see [73] onwards. That included three affidavits by Mr Jebb and four affidavits for Superior Lawns, namely three by Mr Alexander Tharby, a legal practitioner employed by the first to sixth defendants' solicitors, Bennett + Co, and one by Mr Kingsley Craig Flugge of 6 April 2016.
That base material was then augmented by further affidavits specifically made within the present application. To that end, Mr Jebb has made two further affidavits of 23 and 28 April 2018.
At par 4 of his 23 April 2018 affidavit, Mr Jebb says:
In my capacity as trustee for the Trafalgar West Investments Trust (Trust) on 23 February 2018 I was registered as shareholder of the first defendant (Company) [referring to Superior Lawns] in respect to the shares formerly held by the Former Trustee in its capacity as trustee of the Trust pursuant to vesting orders made in CIV 1179 of 2017. Annexed hereto and marked PGJ 1 is a true copy of the Company's register of members provided to me by the fourth defendant on 21 March 2018.
Annexure PGJ 1 at page 7 confirms that Trafalgar has ceased to be recorded in the register of members of Superior Lawns as a shareholder of the 345 ordinary shares and one D class share on 23 February 2018. Correlatively, page 8 shows that on the same day Patrick Gerard Gladwyn Jebb was recorded as becoming a member of Superior Lawns in respect of the same shares.
It will be remembered that upon Mr Jebb's (ultimately successful) vesting order application in CIV 1179 of 2017, I had ordered on 14 February 2018:
1.The 345 ordinary shares and 1 'D' class share in the share capital of Superior Lawns Australia Pty Ltd (ACN 008 798 007) presently registered in the name of Trafalgar West Investments Pty Ltd as trustee for Trafalgar West Investments Trust be vested in Patrick Gerard Gladwyn Jebb as trustee for the Trafalgar West Investments Trust.
It may then be discerned that there were nine days between the making of those vesting orders to the making of entries implementing those orders in the register of members as kept by Superior Lawns under s 209 of the Corporations Act. By my assessment, s 234(d) of the Corporations Act applied to Mr Jebb from 14 February 2018 - as a person to whom shares in Superior Lawns were transmitted by operation of law. Subsequent to 23 February 2018, s 234(a) of the Corporations Act also applied to Mr Jebb's membership circumstances - given his newly acquired member status in Superior Lawns.
However, on my assessment, the applicability of s 234(d) and/or s 234(a) in those circumstances for Mr Jebb on and after 14 February 2018 only supports his commencing of a fresh application seeking statutory oppression relief via s 233. The preface of s 234 refers to the 'application' for 'an order under s 233 in relation to a company'. In my view, it does not address the very different scenario of the taking over of a subsisting litigation of another member of Superior Lawns (ie, Trafalgar), which has been seeking statutory oppressive relief by litigation since 2011.
The present application concerns the capacity and entitlement of Mr Jebb to be substituted as a plaintiff into the existing statutory oppression litigation commenced by Trafalgar as a distinct member of Superior Lawns. That is a different scenario to the capacity of a new member to commence a fresh statutory oppression proceeding by their application, albeit complaining of wrongs done to a member other than themselves in the past.
I conclude that there is no support for such a substitution of plaintiff within the text of s 234. Nor is any prior case precedent of any assistance for circumstances like or akin to the present. No prior substitution of plaintiff order seems to have been made in any subsisting statutory oppression pending action in Australia to date. Hence, the present application can only be addressed wholly as a pure matter of principle.
Attachment PGJ 2 of Mr Jebb's affidavit of 23 April 2018 is a letter from the liquidators of Trafalgar through their firm, Pitcher Partners, advising Bennett + Co in these terms:
It is untenable for the Company to remain as plaintiff or that we should be required to take any further part in the proceedings. Not only has the Company never been trustee while under our supervision and control but by virtue of the vesting orders the Company is now no longer entitled to remain the registered legal owner of the shares, nor a member of SLA.
A further communication from the liquidators via Pitcher Partners to my Associate on 28 March 2018 (PGJ 3) said this:
As we said in our letter to the defendant's solicitors, removal of the case from the Inactive Cases List is a necessary precursor to Mr Jebb's foreshadowed substitution application and we support Mr Jebb's application for this to occur without further interlocutory hearings or delays. We do so because:
1.…
2.as his Honour held in Trafalgar West Investments -v- Superior Lawns Ltd & Ors (No 2) [2012] WASC 169 at [37], [58] and [60] it is likely that the Company no longer has any standing or right to make any further applications in those proceedings.
For the second of those reasons, we do not consider that we should take any further part in these proceedings.
Mr Jebb's affidavit of 28 April 2018 seeks to provide some further detail about his latest litigation funding arrangements with a UK‑based litigation funder, Balance Legal Capital LLP (BLC). He relates at par 7:
On 3 July 2017 I secured litigation funding support from Balance Rev Ltd, which I was informed by Mr Rothkopf and verily believe is an associated entity of BLC, to continue the Oppression Proceedings on my being substituted as plaintiff. A redacted copy of the funding agreement was provided to the court in related proceedings CIV 1179 of 2017.
In my vesting order reasons, I made some earlier reference to the new litigation funding arrangement, as attachment PGJ 12 to Mr Jebb's affidavit of 20 July 2017 in CIV 1179 of 2017. See [90] where I said:
In fact PGJ12 is so heavily redacted, particularly as regards some applicable conditions precedent to funding at par 2, that very little beyond the most perfunctory of information can be gained from the redacted document - as Mr Bennett for Superior Lawns pointed out during his argument.
During present arguments, Mr Bennett once again directed strong criticism at the inadequate information provided in that heavily redacted litigation funding agreement. He contended, as is the case, that the redaction of the new funder's obligations (if any) to assist in meeting a future provision for security for costs inhibited any real insight as to whether the new funder would be obliged to assist with any future obligation to provide security, were that ordered under a presently pending (but stayed) application by the first to sixth defendants in COR 59 of 2011 for further tranches of security to be provided.
On behalf of the first to sixth defendants resisting the substitution of Mr Jebb via the present application, there were three further affidavits filed by Alexander James Tharby of Bennett + Co. His three affidavits were affirmed on 26 April 2018 (with attachments AJT‑1 to AJT-59), 26 April 2018 (with attachments AJT-60 to AJT-65) and 30 April 2018 (with attachments AJT-66 to AJT-69).
Mr Tharby's second affidavit of 26 April 2018 provided some publicly available financial records concerning the new litigation funder Balance REV Ltd. Attachment AJT-65 provided financial statements for that corporation for the year ended 31 March 2017 with a balance sheet for that same period showing a position of net liabilities over assets of £685,809: see page 22 of that affidavit. Note 7 to the accounts at page 25 of that affidavit shows its loan liability of £2 million as an amount falling due after more than one year, contrasting with £551,863 due to creditors in amounts falling due within one year shown at note 6.
Mr Bennett's concerns of an ostensible 'shakiness' of the financial position of Balance REV Ltd prompted further material that was received under Mr Jebb's affidavit of 28 April 2018. In particular, I note PGJ 5, a communication to Mr Jebb of 27 April 2018 from BLC, signed by Mr Robert Rothkopf. Paragraph 5 of that communication says:
Balance REV has access to dedicated capital facilities which it draws down as required to fund its litigation investments. The company accounts therefore do not disclose the capital to which Balance REV has access as Balance REV does not hold funds before they are needed. This is common practice in funds.
Mr Jebb's affidavit of 28 April 2018 relates he was informed by Mr Rothkopf and he verily believes that Balance REV Ltd is 'an associated entity' of BLC: see par 7.
That led to Mr Tharby's affidavit of 30 April 2018 specifically concerning BLC. In particular, attachment AJT‑68 is BLC's publicly available but unaudited abbreviated accounts for the period of 14 August 2015 to 31 March 2016. AJT-69 is an abbreviated balance sheet for the year ended 31 March 2016 only showing net assets of £7,085.
Hence, there is little within all the extra financial information now provided about BLC to give any reliable insight as to its true financial wherewithal or of its as associated entities. However, they would appear to be currently meeting their regulatory obligations for litigation funders in the UK.
My description of the underlying materials above as provided provided is brief. It necessarily needs to be read with my discussion of the materials as were provided in my vesting order reasons: see [73] ‑ [107].
I add that Mr Tharby's first affidavit of 26 April 2018 in this action collected many prior documents which have emerged across the course of COR 59 of 2011 and CIV 1179 of 2017. It is unnecessary to traverse most of those historic materials yet again.
Of some contextual significance as regards the progression of COR 59 of 2011 is the first to sixth defendants' chronology of relevant events as is found at AJT‑1 of Mr Tharby's first affidavit of 26 April 2018. The chronology is a helpful contextual reference, particularly for its collection of facts relied upon as discretionary considerations in the substitution of plaintiff application under RSC O 18 r 6 or r 7. Consequently, for pure convenience, I will append attachment AJT-1 as schedule A to these reasons.
Finally, as regards the materials underlying the present application, I need to refer again to my vesting order reasons from [150] - where I referred to five of earlier published reasons and then summarised aspects of those decisions. For convenience, I again identify those five decisions:
•Trafalgar v Superior Lawns Australia Pty Ltd [No 2] [2012] WASC 169 [14] - [16], [28], [34], [53], [59] - [61], [74] - [75];
•Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 3] [2012] WASC 319 [1], [15];
•Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2012] WASC 460 [3] - [4], [63] - [74];
•Trafalgar as Trustee for the Trafalgar West Investments Trust v Superior Lawns [No 2] [2013] WASC 143 [29] - [31]; and.
•Trafalgar as Trustee for the Trafalgar West Investments Trust v Superior Lawns [No 6] 2014 WASC 278 [72] - [76].
Legal principles discussed in those earlier decisions remain relevant to my present consideration of the argued transmissibility of Trafalgar's statutory oppression cause of action in COR 59 of 2011 to Mr Jebb under State law.
To the above collection of prior reasons I must now add a sixth, namely Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Pty Ltd [No 7] [2015] WASC 280. Those reasons provide my more detailed summary of the statutory oppression cause of action arguments as advanced to date by Trafalgar - under the reamended originating process augmented by a reamended substituted statement of claim of 11 March 2015: see [13] - [21]. It is of course relevant to have some appreciation of what the alleged underlying statutory oppression arguments of Trafalgar were about.
Concerning Trafalgar's pleaded statutory oppression grievances raised against Superior Lawns in COR 59 of 2011, I noted in those reasons two distinct 'baskets' of statutory oppression grievances: see [28] and [30]. Concerning the second 'basket' of oppression grievances of a derivative or quasi‑derivative kind, I must mention my further observations at [39] - [41]. They are presently relevant as regards discretionary considerations towards relief, in particular where the likely relief sought will ultimately be in the character of 'buy-out' orders concerning the shares of the member contending statutory oppression. However, that is in circumstances where if Mr Jebb is substituted as plaintiff then the applicant at trial seeking relief would not be the member who was the subject of the alleged oppressive conduct. I have previously discussed that this is not fatal, given Re Spargos. But it is different.
In [2012] WASC 169, I said:
[54]The relief a court may grant under s 233 of the Corporations Act is discretionary. So the ramifications of Trafalgar's cessation as a member of Superior Lawns may prove to be wider than just a loss of standing.
[55]Discretion in the relief granted under s 232 and s 233 is an important consideration. It is one thing to afford redress where an existing member's interests have been and remain affected by oppressive conduct. It is another thing to grant redress to a former shareholder that has disposed of their shareholding. Redressing the position of a current shareholder that has acquired shares from another party, knowing that the transferor of those shares has claimed to have been oppressed and had issued proceedings, is a distinct, third scenario.
What presents on the horizon here, if Mr Jebb's plaintiff substitution application succeeds, is effectively something of a fourth scenario, where a new shareholder (member) pursues s 233 relief effectively as the 'fruits' of a subsisting federal law statutory oppression cause of action that has been transmitted as a subsisting cause of action under the force and effect of a State law. That is a novel scenario to say the least.
Conclusions on transmissibility via s 10(1) of the Trustees Act of a subsisting federal law statutory oppression cause of action
Given a degree of surrounding urgency associated with the present application, I will articulate my conclusions concerning Mr Jebb's originating motion in a somewhat abbreviated fashion.
First, I reaffirm what I said in my vesting order reasons. At the request of all the parties, I then attempted to foreshadow my views on the fate of the then foreshadowed substitution of plaintiff application, if brought in an aftermath of me issuing vesting orders (as eventually transpired) concerning the 345 ordinary shares and one D class share in Superior Lawns, then registered by Superior Lawns in the name of Trafalgar. In particular, I would emphasise the observations at [2], [3], [27], [45] - [46], [51] - [54], [57] - [60], [113], [115] - [120], [127], [132] - [133], [142], [148] -[149], [151] - [153], [160] - [170], [177], [197], [199], [214], [224] - [226] and [229] - [230].
Upon the present application, as previously mentioned, new legal arguments were put for Mr Jebb that were not canvassed before me in the vesting order application. The significant component of the new arguments are tied to s 10(1) of the Trustees Act as regards the asserted transmission in law (not by assignment) of Trafalgar's statutory Corporations Act oppression action (COR 59 of 2011) to Mr Jebb on 13 December 2016. Nevertheless, most of the new arguments (see pars 15 to 36 of the written submissions for Mr Jebb of 23 April 2018) appear to be grounded upon a founding contention that a federal statutory cause of action for oppression under pt 2F.1 of the Corporations Act is assignable - as opposed to a statutory cause of action seeking compensation under s 82 or s 87 of the former Trade Practices Act, which is not.
There is no suggestion of any assignment of a cause of action to Mr Jebb in the present circumstances. The present argument goes to a suggested transmission in law by the force of s 10(1) of the Trustees Act. Nevertheless, multiple cases dealing with the (non)assignability of federal statutory trade practices causes of action were assembled for my consideration. This was for the asserted purpose of attempting to distinguish them all. Mr Jebb refers, in particular, to observations made by Le Miere J in Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia [No 6] [2014] WASC 203 at [22], to Jackson J's reasons in Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jacques [No 2] [2016] QSC 242, to Barker J's decision in the Federal Court in MG Corrosion Consultants Pty Ltd v Gilmour [2011] FCA 1514and to the observations of the New South Wales Court of Appeal in The Owners - Strata Plan No 5290 v CGS & Co Pty Ltd (2011) 81 NSWLR 285. Reference is also made to the observations of Davies J in Park v Allied Mortgage Corporation Ltd (1993) ATPR (Digest) 46 ‑ 105.
Second, contending for a reverse conclusion as regards the potential assignability of a statutory oppression action under the Corporations Act, Mr Jebb calls in aid a Canadian decision from the Court of Appeal of Ontario, Ma v Ma (2012) ONCA 408. It is plain, however, from a close examination of that decision that its local Canadian statutory foundations are wholly unique and distinct: see the Canada Business Corporations Act RSC 1985, c.C-44 [as am.] s 51(1), (2) and (3). I find the decision, with respect, to be of no assistance to me on the present arguments made by analogy to the argued potential assignability of a statutory federal cause of action for oppression.
If it is relevant, I respectfully agree with and still prefer the obiter as expressed by Gordon J in Mijac [33] as to the non‑assignability of a chose in action contending for an allegation of breach of s 232 of the Corporations Act as a personal right. I had expressed that view in Trafalgar as Trustee for the Trafalgar West Investments Trust v Superior Lawns [No 2] [2013] WASC 143 [15] and after reflection on the issue yet again, would adhere to it. I am wholly unmoved by the present arguments of Mr Jebb to the contrary.
If anything, my assessment of the terms of pt 2F.1 of the Corporations Act now leads me to the view that the narrow range of potential plaintiffs as is collected under s 234 reflects a Commonwealth legislative regime that was attempting to very tightly control the range of persons who might legitimately seek to pursue the potentially very disruptive relief under s 233 against a corporation and its officers. There are strong policy considerations supporting such a tight level of control, given the harm and disruption to a corporation's business that can be inflicted under such litigation.
Third, the submissions for Mr Jebb of 23 April 2018 accept that the proper interpretation of pt 2F.1 of the Corporations Act as a federal law needs to be considered in answering whether s 10(1) of the Trustees Act can be applicable in present circumstances as he contends: see pars 37 to 61. The submissions for Mr Jebb also seek to distinguish the body of case law firmly establishing the non-assignability of a cause of action seeking relief under s 82 or s 87 of the former Trade Practices Act. They culminate at par 51:
The language used in Pt 2F.1 to create the statutory cause of action and the available remedies is far removed from the language used to create the statutory causes of action and remedies provided by sections 82 and 87 of the former Trade Practices Act and section 1317H(1) of the Corporations Act.
Again, with great respect, I must disagree. No case authority supports that bare contention. Nor does principle, in my view.
Fourth, concerning Mr Jebb's s 10(1) transmission by law argument about the cause of action for statutory oppression as begun by Trafalgar under COR 59 of 2011, I reiterate from my vesting order reasons what I said then as regards the inability of a State law to impinge upon what is a holistic and complete federal law regime of corporations law. In my vesting order reasons, I then dealt with arguments of Mr Jebb grounded upon a suggested force and effect of s 7(6) of the Trustees Act: see my observations in those reasons at [185] - [189] and [192] - [196]. At [197] - [199] I had said:
Fifth, in a context of Mr Jebb's foreshadowed application seeking his future substitution as the plaintiff for T Co [Trafalgar] in COR 59 of 2011, provisions of the Rules of the Supreme Court that are applicable to a joinder or substitution of parties seem to fall within the class of (state) laws picked up and applied as federal laws via s 79(1) (upon either the second or third constructions towards 79(1) of the Judiciary Act, as explained by Edelman J in Rizeq). But there is a necessary clarification required. What is clearly seen as the procedural subject matter of O 18 of the Rules of the Supreme Court, as regards party joinder, must not be inconsistent with the substantive federal (Corporations Act) laws under direct application. In other words, provisions of the Rules of the Supreme Court if applied via s 79 of the Judiciary Act can have no effect, if assessed as inconsistent with the provisions of Pt 2F.1 of the Corporations Act in COR 59 of 2011. That would be an instance of a substantive federal law having 'otherwise provided', vis-à-vis the state procedural law.
Sixth, state procedural rules of a court that are potentially capable of being picked up and applied as federal laws via s 79(1) of the Judiciary Act within a state court's exercise of federal jurisdiction in a statutory oppression litigation - must be contrasted to what is a different genre of substantive state law like s 7(6) of the Trustees Act (WA). That state law on its face is directed at a conferral or acknowledgement of private rights on a new trustee. Section 7(6), on my evaluation at this time, would seem to be dealing with private rights. Hence, for the purpose of assessing its potential to be picked up and applied as a federal law via s 79 of the Judiciary Act (Cth), the position looks decidedly bleak. Section 7(6) looks to be a state law more directed at delivering substantial rights, rather than applying to a court for a purpose of elucidating how the state court might go about the task of exercising its jurisdiction.
So s 7(6) of the Trustees Act would not likely on my assessment, be 'picked up' in COR 59 of 2011 via s 79(1) of the Judiciary Act as a federal law potentially applicable under this court's exercise of federal jurisdiction in that action.
In short, I do not evaluate s 10(1) of the Trustees Act as permissibly being capable of injecting what would be yet further classes of potential plaintiff into a closely contained federal regime of defined membership or quasi‑membership classes, as enunciated under s 231 and in s 234 within pt 2F.1 of the Corporations Act. I have already distinguished a very different situation of Mr Jebb as a new member of s 23(d), now commencing his own fresh action as one permissible option for him, by my vesting order reasons: see [209]. But that is not what he now seeks. Instead, Mr Jebb seeks to effectively (ie, as member B of Superior Lawns) be substituted as plaintiff and run to trial in lieu of Trafalgar to take over the subsisting litigation (COR 59 of 2011) as commenced by Trafalgar (ie, as member A) in 2011. By my evaluation of pt 2F.1, that substitution of plaintiff scenario falls outside the parameters of what is allowed under the federal law. The federal parameters for potential plaintiffs may not be inconsistently augmented or enlarged under an asserted application of a State law like s 10(1) of the Trustees Act, in my view.
Nevertheless, had I been persuaded that it were open to viably issue an order under RSC O 18 r 6 or r 7 and substitute Mr Jebb for Trafalgar in COR 59 of 2011, then further discretionary considerations would arise to be evaluated. I will briefly consider those discretionary considerations in the ensuing section of these reasons.
Given the long history of COR 59 of 2011 and from the unique perspective of my 'ringside seat' as its assigned CMC List case manager from 2011, I have witnessed at close hand the stuttering progress of that litigation by Trafalgar (which was relevantly controlled and directed exclusively by Mr Jebb over that whole period).
As I proceed to explain, I would still, just as a matter of discretion, refuse Mr Jebb's substitution of plaintiff application.
Discretionary considerations arising if an order was issued under RSC O 18 r 6 or r 7
As mentioned, I approach the assessment on the premise that the preferred basis for the application is RSC O 18 r 7, rather than r 6: see Bajada [35] - [38]. I proceed (hypothetically) on the basis that it is legitimate for a non-party who seeks to be substituted as a plaintiff to bring an application outside the relevant proceedings into which substitution is sought.
Here, Mr Jebb's substitution application is brought under his originating motion, albeit he seeks substitution as the continuing plaintiff for Trafalgar in COR 59 of 2011. However, COR 59 of 2011 is currently on the Inactive Cases List. Hence, the scope for interlocutory applications which may legitimately be brought in that proceeding, even by the parties thereto, is heavily truncated: see O 4A r 25, r 26 and r 27. Were I to accede to the present application by motion of Mr Jebb, the order for his substitution in COR 59 of 2011 could be made and implemented. It would then be proper to allow Mr Jebb to apply for COR 59 of 2011 to be taken off the Inactive Cases List. However, for the following reasons, as a matter of discretion, I am of the view that no order for plaintiff substitution should be made on the present originating motion of Mr Jebb.
If, as I have now concluded above, it is not open as a matter of law for Mr Jebb to be legitimately substituted for Trafalgar as plaintiff into COR 59 of 2011, then the present discretionary evaluations are wholly irrelevant. There is no point substituting Mr Jebb as a plaintiff into COR 59 of 2011 if he holds no lawful basis to pursue that existing proceeding. Hence, the following evaluation must proceed upon the hypothesis that it is arguable that Mr Jebb, via s 10(1) of the Trustees Act, had Trafalgar's statutory cause of action (as currently advanced in COR 59 of 2011) transmitted to him and that this has been so from a temporal perspective, either when Mr Jebb became substituted as trustee on 13 December 2016, or 14 February 2018 when I issued the vesting orders over the shares in his favour in CIV 1179 of 2017, or on 28 February 2018, when Mr Jebb only then replaced Trafalgar as a member (registered shareholder) recorded in the share register of Superior Lawns. A precise date (between December 2016 and 23 February 2018) is irrelevant for present purposes under what is essentially a hypothetical discretionary evaluation towards Mr Jebb's potential substitution in COR 59 of 2011 as plaintiff in lieu of Trafalgar.
Non-exclusively, the following considerations lead me to conclude, in any event, against the present substitution application.
First, as matters stand, COR 59 of 2011 is effectively over. It sits on the court's Inactive Cases List. I ordered it there at the behest of the first to sixth defendants on 18 January 2018. Prior to that date, COR 59 of 2011 was inactive for some considerable time. It had not effectively progressed since 19 July 2016, when my reasons in Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 12] [2016] WASC 216 were published concerning a restraint I then issued against Mr Jebb against his acting through his law firm Jebb Legal (essentially, Mr Jebb as sole practitioner) as Trafalgar's lawyers of record: see RSC O 4A r 24. COR 59 of 2011 should probably have been on the Inactive Cases List 12 months after that, ie, by July 2017: see RSC O 4A r 25(1)(a).
The orders concerning Jebb Legal arose from an egregious conflict of interest for Mr Jebb which was never denied by him, but it perpetuated and recurred nonetheless. I rendered observations about that conflict in 2012: see Trafalgar v Superior Lawns [No 2] [2012] WASC 169. They were thereafter ignored.
On 16 August 2016, Zafra Legal filed a notice to the effect that they were becoming solicitors of record for Trafalgar in COR 59 of 2011. However, in terms of the advancement of COR 59 of 2011, nothing substantive appears to have manifested from that point.
On 29 September 2016, Trafalgar's former litigation funder, LCM Litigation Management Pty Ltd (LCM), obtained a certificate in the amount of $31,000 in respect of costs awarded against Trafalgar in related litigation on 26 May 2016: see Trafalgar West Investments Pty Ltd v LCM Litigation Management Pty Ltd [2016] WASC 159. But the payment of $31,000 was not made by Trafalgar. On 4 November 2016, LCM then served a statutory demand on Trafalgar in respect of the unmet taxed costs. The costs were still not met within the 21‑day period. That was an act of insolvency on Trafalgar's part at 26 November 2016. It led to LCM indicating it intended to apply to wind up Trafalgar.
On 8 February 2017, Trafalgar appointed three partners of Pitcher Partners as liquidators. They were appointed on a voluntary basis by Trafalgar's board (ie, Mr Jebb as sole director) in circumstances of the demonstrable insolvency of Trafalgar, occasioned over a relatively unpaid modest debt to LCM. An appointment of liquidators to Trafalgar delivered a statutory stay to COR 59 of 2011 pursuant to s 500(2) of the Corporations Act.
As matters currently stand, the liquidators of Trafalgar accept that that corporation has ceased to be a member of Superior Lawns, albeit Trafalgar was a member when COR 59 of 2011 was commenced by Trafalgar in 2011: see my vesting order reasons at [204]. However, after 23 February 2018, Trafalgar has lost its membership status. A former loss of membership status by Trafalgar in 2012 under Mr Jebb's manoeuvrings was temporary: see Trafalgar v Superior Lawns [No 2] [2012] WASC 169 [60]. Nevertheless, those events delayed the progress of the litigation for approximately two years: see Trafalgar as Trustee for the Trafalgar Investments Trust v Superior Lawns [No 2] [2013] WASC 143 [6(c)].
Trafalgar, of course, is heavily insolvent. A large number of proofs of debt have been filed. It appears the liquidators do not even have funds to assess the proofs of debt as lodged by various creditors or contingent creditors, including by Superior Lawns. Broadly speaking, the extent of Trafalgar's indebtedness as a trading trustee to legitimate creditors appears to be in the order of millions of dollars, although no final assessment has been made. In my vesting order reasons, I collected some of the information about Trafalgar's debts: see [97] to [106]. Mr Jebb himself has submitted a claim as a creditor for an amount over a million dollars for legal fees: see [79] and note [80] of my vesting order reasons, which refers to AJT 33 of Mr Tharby's affidavit of 26 April 2017 (in CIV 1179 of 2017) containing the liquidator's report and schedule H, which identifies Trafalgar's unsecured creditors and further contingent liabilities.
Negative considerations against Mr Jebb's substitution as plaintiff emerge at the end of all this, namely:
(a)Mr Jebb was the sole director of Trafalgar since 2011 when COR 59 of 2011 was commenced. Accordingly, he is the sole person responsible for all strategic decisions which surround what has effectively been the less than acceptable progression of Trafalgar's action over a seven-year period. Fortunately, I issued some limited security for costs orders against Trafalgar along the way, although those amounts appear to pale into insignificance in terms of the true financial outlays which the defence of this litigation has imposed upon the first to sixth defendants. The submitted claim by Mr Jebb to the liquidators for his legal fees against Trafalgar, $1,111,877 (see ts 52), provides something of an insight towards the real expense for the defendants of defending COR 59 of 2011 to date. As AON Risk Services Australia Ltd v Australian National University [2008] ACTCA 13; (2008) 227 FLR 388 established, the perpetuation of litigation over time carries considerations extending to those of emotional and disruptive character that go beyond pure fiscal outlays: see Mr Flugge's affidavit which is uncontradicted on that issue. These are considerations to be weighed in present circumstances where COR 59 of 2011 is now effectively 'dead' under Trafalgar as plaintiff.
(b)Replacing Trafalgar with Mr Jebb as a plaintiff in COR 59 of 2011 would not be introducing any fresh directing mind towards the future strategic decisions necessary to be taken on behalf of the plaintiff in the litigation. Fault for the unacceptable progression of Trafalgar's action needs to be laid fairly and squarely with Mr Jebb personally in terms of his strategic decisions taken over seven years. The prospective horizon would indicate no guiding hand changes in that respect for the litigation. Mr Jebb seeks to effectively replace the insolvent Trafalgar plaintiff 'shell' and then to rise from the ashes like a phoenix to continue that litigation - seemingly oblivious to the carnage of creditors burnt so far.
(c)Mr Jebb has manifested a gross lack of judgment at various times whilst in control of Trafalgar as regards its decision making in COR 59 of 2011. He has repeatedly acted for Trafalgar on occasions as a legal practitioner in gross conflict of interest and whilst he has purported to recognise that by his words to this court, he has carried on regardless until stopped by order. Any prospect of Mr Jebb as 'Jebb Legal' being on the record again in COR 59 of 2011 for the plaintiff is an unacceptable risk. I assess that scenario to be a real future risk notwithstanding what is said about a new litigation funder and independent legal representation. I have heard this too often in the past, only to be disappointed by Mr Jebb's conduct.
(d)At various points over the last seven years I have been called upon to express interlocutory views as to arguability and strength of the underlying statutory oppression action (COR 59 of 2011). My reasons advanced on strikeout or dismissal applications under Trafalgar West Investments v Superior Lawns [No 6] and Trafalgar West Investments v Superior Lawns [No 7] embarked upon such evaluations. The short point to be presently made is that COR 59 of 2011 is far from presenting as some bankable cause of action of overwhelming merit. On its face, it is a speculative action. It manifests novel derivative and quasi‑derivative grievances complaining not only of alleged wrongs done to Trafalgar as a minority shareholder by Superior Lawns, but also seeks to pursue wider relief, by advancing alleged causes of action supposedly held by Superior Lawns as against its directors: see my observations in Trafalgar v Superior Lawns [No 7] at [30] and [31]. On the law that course looks to be presently permissible for Trafalgar as a matter of arguability. But it is unusual to say the least. It is a course that effectively circumvents any need for leave to be obtained under s 236 and s 237 of the Corporations Act as I have previously observed. The position then is not one of a statutory cause of action for oppression of clear and overwhelming merit being displayed. COR 59 of 2011 presents on paper as a novel action, particularly as regards the quasi‑derivative actions directed against Superior Lawns' board members, in a context of the likely potential end relief (assuming success) by way of a buy‑out order of shares final. Relief is very much to be the subject of discretionary considerations, even assuming success some long way down the track.
(e)Allied to all the above is my further observation that COR 59 of 2011 remains a considerable distance away from being ready for what will be a longish trial. There are unresolved issues concerning discovery and a currently unheard security for costs top-up application by the Superior Lawns defendants. Witness statements and expert reports have not been exchanged. Accordingly, COR 59 of 2011 is not an action which stands as well prepared and currently almost ready for a trial. Much preparatory work and, to that end, significant expenditures by outlay of preparatory legal costs on all sides will be required.
(f)Mr Jebb points to the replacement litigation funding arrangements which he says he has concluded with a new litigation funder, Balance REV Ltd. However, the materials provided about the precise funding arrangements, under a claim of legal professional privilege, have been less than fully exposed at this stage. I rendered that observation in my vesting order reasons, given the heavy redactions to the funding agreement of July 2017 that Mr Jebb had provided in his further affidavit of 21 July 2017 (in CIV 1179 of 2017) as attachment PGJ 12: see [88] ‑ [90].
(g)Given some opaque concluding observations by pro bono counsel for Mr Jebb in reply (see ts 79 - 81), it cannot be discounted that one of Mr Jebb's proposed future positions, were he substituted as plaintiff in COR 59 of 2011, would be to contend that as a personal litigant (plaintiff), that unlike the corporation Trafalgar, he should not be ordered to provide any further security for costs, if COR 59 of 2011 advances towards a trial. But given what has happened with Trafalgar as regards its present insolvency (achieved under the exclusive stewardship of Mr Jebb) that position strikes me as tactical and ultimately unacceptable, as a matter of overall fairness towards the defendants. For these defendants there is no comfort from a security for costs funds sourcing perspective under the opaque terms of the funding arrangements as exposed only in redacted terms.
(h)As I have observed, rather than being appointed as a replacement plaintiff in lieu of Trafalgar in COR 59 of 2011, following Re Spargos (which I have discussed in a number of previous interlocutory reasons and most recently as to its implications at [161] to [163] of my vesting order reasons), it is theoretically open to Mr Jebb to commence his own statutory oppression action under s 234 of the Corporations Act, albeit he was not the relevant oppressed member (Trafalgar allegedly was) at the times the alleged oppressive acts or omissions were manifested by Superior Lawns and/or its management as against Trafalgar. In other words, a fresh action (essentially, as member B) if commenced now by Mr Jebb, could still complain of statutory oppression conduct against member A (Trafalgar) since Mr Jebb in 2018 is within s 234 (either under s 234(a) as a member, or s 234(d) as a person to whom shares in Trafalgar have been transmitted by law). That is the position I observed upon in my vesting order reasons: see [209].
Those past observations about a fresh application brought by Mr Jebb say nothing much about the potential obstacles to a fresh action, including limitation of actions considerations or an even greater forensic negative consideration concerning discretionary s 233 final relief potentially accessible by Mr Jebb, should he succeed at any trial (as member B). That situation stands in contrast to the discretionary final relief that is potentially applicable to Trafalgar (as member A), if it were to succeed in COR 59 of 2011.
All these novel considerations are essentially speculations within territory largely uncharted by the law to date. Nevertheless, as a consideration to be weighed in the overall evaluation, Mr Jebb's option of bringing a fresh oppression action needs to be recognised and to be weighed in a context of arguments that he should be substituted as plaintiff in COR 59 of 2011. In other words, there are other options still open to Mr Jebb beyond his substitution as plaintiff in the subsisting litigation.
(i)However, regarding any scenario of a fresh action by Mr Jebb, the reply submissions of pro bono counsel seemed to me to proceed on a premise that Mr Jebb's option of commencing a fresh action is a positive factor and hence, that it would be wrong, unfair, or unduly technical to deny him the pathway of being substituted in COR 59 of 2011, because this would be only raising mere technicalities to outcomes that he could achieve, in any event, via a fresh action.
I cannot accept that submission towards a contended like for like character in the two scenarios. COR 59 of 2011 is Trafalgar's cause of action commenced in 2011 (as member A). By my assessment, any fresh action commenced by Mr Jebb in 2018 as a person in whom the Super Lawns shares formerly held by Trafalgar had been transmitted in law, or as a (new) member in respect of those same shares as from 23 February 2018, is a distinctly different statutory cause of action advanced by a member B. That consideration would be particularly relevant to final buy‑out order relief, ultimately to be assessed.
It is one thing to be a minority shareholder (at the level of 30% at one point) and to advance a grievance of oppressive conduct under statute as Trafalgar did. It is quite another for a down‑the‑line purchaser or transmittee of the same shares from member A (with notice of all prior events) to themselves seek buy‑out relief in respect of the same minority shareholding they have later come to hold (beneficially or non-beneficially - it would make no difference).
Again, from a precedent perspective, the situation is largely that of a blank canvas. But the end character of the final oppression relief sought is always discretionary. These considerations may, in the end, prove to be significant to future relief.
The basal point to be made is that member B's cause of action is not member A's cause of action.
My conclusions
In summary, a substitution of Mr Jebb as plaintiff in COR 59 of 2011 would be a futile exercise. I repeat the observations I made in that regard under my vesting order reasons. Since then, new arguments from Mr Jebb have emerged to support his substitution as plaintiff, by reference to the suggested force and effect of s 10(1) of the Trustees Act. However, the new arguments are once again grounded on the suggested force of a State law augmenting on the scope of federal laws under pt 2F.1 of the Corporations Act as regards a statutory oppression cause of action. The new argument is equally flawed and misconceived. Even if that were not the case, adverse discretionary considerations heavily dictate my required refusal of the present application, leaving Mr Jebb to commence a fresh application for statutory oppression if he can.
In all the circumstances, I must refuse the relief sought by Mr Jebb under par 3 of his originating motion of 23 April 2018, which seeks his substitution for Trafalgar as plaintiff in COR 59 of 2011. Costs should follow that event. The originating motion of Mr Jebb is accordingly dismissed with costs payable by Mr Jebb to the first to sixth defendants.
Dismissal of Mr Jebb's substitution application shall take effect, nevertheless, upon publication of these reasons. All questions of costs will be reserved for future determination if and when required.
SCHEDULE A
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AC
RESEARCH ASSOCIATE/ORDERLY TO KENNETH MARTIN & CORBOY JJ1 JUNE 2018
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